what is a sovereign wealth fund(SWF), and how do they work?
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it’s the same as any investment fund, just managed by the state instead of a firm. You might have heard about the Alaska Permanent Dividend, which cuts each resident of Alaska a check every year. That’s funded by an SWF Alaska established using their oil revenue. The fund appreciates in value, the Alaskan government shares some of the profits with the people.
The biggest sources are oil/natural resources and government pension programs. In both situations the government has a source of income (pension contributions, revenue from state owned oil enterprises or tax revenue on privatized oil extraction) and a clear future need for funding (to support pensioners, to cushion the budget and economy when the oil dries up).
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